Home / Companies / News /  Cyrus Mistry won’t resign as chairman of Tata group companies

Mumbai: Cyrus Mistry has no intention of stepping down from Tata group companies on his own, said a person close to the ousted chairman of Tata Sons Ltd, indicating that a potentially long and bruising shareholder and legal battle lies ahead for the conglomerate.

Many directors of group companies have commended the performance of Mistry, who will continue with this responsibilities, said the person, who spoke on condition of anonymity.

This makes it clear that Mistry, 48, is digging in his heels for a long fight and has no intention of voluntarily giving up his positions in Tata group companies, putting him in direct confrontation with his predecessor Ratan Tata, 78, who is trying to consolidate his hold over the conglomerate after being named interim chairman of Tata Sons.

Mistry, who was removed as chairman of the group holding company on 24 October, is still chairman and non-executive director of Tata Motors Ltd, owner of Jaguar Land Rover; Tata Steel Ltd, Tata Power Co. Ltd, Indian Hotels Co. Ltd, and many other group companies.

Tata Sons doesn’t hold a majority of the stock in those and other group units, making the task of evicting Mistry difficult. The stake held by it ranges from 22-31%. The stake held by Tata Trusts hovers between 0.01% and 5%.

Two days ago, Ratan Tata justified the replacement of Mistry as chairman in a letter to employees. He said the move to replace Mistry was a well-thought-out decision.

A look at the boardroom composition of the top six Tata group companies, where Mistry is chairman and the Tatas have a less than 40% shareholding, shows that it is a close division among those who have come on board in the Mistry era and those who have been around for a longer time. The people who have been around longer also sometimes hold multiple Tata company directorships.

ALSO READ | Who owns how much in Tata group firms?

To take just the example of Tata Steel, where the promoters hold around 31%, Nusli Wadia has been a director since 1979. He is also a board member at other firms such as Tata Motors and Tata Chemicals Ltd. Or take the case of others such as Subodh Bhargava, Andrew Robb and Jacobus Schraven. They have been associated with Tata Steel for almost a decade now as directors.

Directors appointed over the last five years include Vibha Paul Rishi, Ireena Vittal, Mallika Srinivasan, Gautam Banerjee and O.P. Bhatt, among others.

These are independent directors—those appointed to protect the interests of the minority shareholders—and will apply their own judgment in gauging Mistry’s performance. Thus, it is difficult to reckon which way they will vote, but it also points to the fact that removing Mistry won’t be an easy task for Tata Sons.

ALSO READ | The finances of Tata Trusts

The composition of the board of directors becomes all the more important since the chairman is usually appointed by the board while the entry of a director onto the board is decided by shareholders.

Simply put, while Mistry may be replaced as chairman by the board, his position as a director on the board is more secure.

According to J.N. Gupta, managing director at Stakeholders Empowerment Services, a proxy advisory firm, a director can be removed either through a shareholder’s special notice or if the board on its own places a resolution for removal of a director before shareholders (if the articles of associations permit).

But it is a long process.

“In the current case, Mr Mistry is not ex-officio chairman in Tata companies (his chairmanship has nothing to do with chairmanship at Tata Sons—at least legally), therefore removal has to be individually decided in each company," said Gupta in an email.

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